France - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2021-03-04

The U.S.-French commercial and economic alliance is one of the United States’ oldest and closest. The United States and France established diplomatic relations in 1778 and the United States’ first trade agreement, the Treaty of Amity and Commerce between the United States and France, was signed that year. Relations between the United States and France have remained active and friendly. Our countries share common values and have similar policies on most political, economic, and security issues.

With a GDP of approximately $2.7 trillion in 2019 (+1.5% growth in 2019, down from 1.7% in 2018), France is the world’s fifth-largest economy and Europe’s third largest economy after Germany and the UK.  It has substantial agricultural resources and maintains a strong manufacturing sector, despite a recent decline.  A dynamic services sector now accounts for an increasingly large share of economic activity and is responsible for most job creation in recent years.  France initiated the G-20, is host to the OECD, and is a member of the G-7,  the European Union, and the World Trade Organization, confirming its status as a leading economic player in the world.

France has an educated population, first-rate universities, and a talented workforce.  It has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders.  The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks and public transportation, and efficient intermodal connections. In 2018, France was the ninth largest global market for foreign direct investment (FDI) inflows with a year-on-year increase of 2%.  In total, there are more than 28,000 foreign-owned companies doing business in France.  It is the home to 29 of the world’s 500 largest companies.  In 2018, the World Economic Forum ranked France 17th in terms of global competitiveness.

Trade and investment ties between the United States and France are strong. On average, over $1 billion in commercial transactions, including sales of U.S. and French foreign affiliates, takes place every day. U.S. exports to France include industrial chemicals, aircraft and engines, electronic components, telecommunications, computer software, computers and peripherals, analytical and scientific instrumentation, medical instruments and supplies, and broadcasting equipment. The United States is the top foreign destination for French investment, France being the sixth largest FDI inflows source in 2019, and the United States is the largest foreign investor in France in terms of job creation.  The United States and France have a bilateral convention on investment and a bilateral tax treaty addressing, among other things, double taxation and tax evasion.

In 2019, the United States was the leading foreign investor in France with a stock of foreign direct investment (FDI) totaling over $87 billion.  More than 4,500 U.S. firms operate in France, supporting nearly 500,000 jobs.  The United States exported $59.6 billion of goods and services to France in 2019. 

Key Link:  https://www.bea.gov/international/#bop

Following the election of French President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms.  By relaxing the rules on companies to hire and fire employees and by offering investment incentives, Macron has buoyed ease of doing business in France.  However, Macron will likely delay or abandon the second phase of his envisioned reforms for unemployment benefits and pensions due to more pressing concerns related to the COVID-19 crisis.

In 2020, the impact of the COVID-19 pandemic on France’s macroeconomic outlook will be severe.  GDP shrank 5.8 percent in the first quarter of 2020 compared to the previous quarter, the sharpest economic contraction since 1949.  France’s official statistical agency INSEE attributed this fall to the government’s restrictions on economic activity due to the pandemic.  However, the GDP figure incorporates only two weeks of France’s confinement, which began March 17, leading economists to predict that second quarter figures will be worse.  The Q1 figure marks the second consecutive quarter of economic contraction, after shrinking 0.1 percent in Q4 of 2019, meaning France has officially fallen into a technical recession.  The Finance Minister announced in April 2020 that he expects economic activity to decline by 8 percent in 2020, the public deficit to increase to 9 percent of GDP, and debt to rise to 115 percent of GDP.

In response to the economic impact of the pandemic, the government launched a €410 billion ($447 billion) emergency fiscal package in March 2020.  The bulk of the package aims to support businesses through loan guarantees and deferrals on tax and social security payments.  The remainder is allocated to stabilizing households and demand, largely through its €24 billion ($26 billion) temporary unemployment scheme that allows workers to stay home while continuing to collect a portion of their wages.

Although France’s emergency fund is sizeable at 16 percent of GDP, it is not sufficient to fully absorb the economic impact of the pandemic.  Key issues to watch in 2020 include: 1) the degree to which COVID-19 continues to agitate the macroeconomic environment; and 2) the size and scope of recovery measures, including additional fiscal support from the government of France, a broader EU rescue package, and the monetary response from the European Central Bank.